Philippines looks to regulate power market as LNG prices surge

SINGAPORE/MANILA - The Philippines plans to rein in power bills as Middle East shipping disruptions drive up LNG prices, its energy secretary told Reuters on Friday, by boosting coal-fired power output and by regulating electricity prices, maybe as soon as next week.

Shipping in the Gulf and through the narrow Strait of Hormuz has slowed sharply as the U.S.-Israel war with Iran escalates, driving LNG prices to their highest since 2022, after an output halt by Qatar, which provides a fifth of global supply.

The Southeast Asian nation could face a rise of 16% in power prices by next month unless the government intervenes, Energy Secretary Sharon Garin told Reuters, adding that Manila was in talks with Indonesia to ensure steady supplies of coal.

"The basic idea is to ramp down liquefied natural gas and ramp up coal and renewables," Garin said, flagging that LNG-fired power plants now supplying the grid can readily be replaced with electricity generated from coal in the short term.

"We're asking for emergency powers in order to regulate the market," she said, adding that the government's effort to limit power prices at current levels could begin as soon as next week.

"Because the cost of living will increase, we are trying to do some temporary relief."

In addition to measures such as speeding renewable linkages and rescheduling maintenance, the Philippines's return to coal will follow its first annual decline in coal-fired output in nearly two decades last year.

That now stands to be reversed, highlighting Asia's struggle with LNG price swings and supply disruptions.

After Qatar's production halt, spot liquefied natural gas prices more than doubled to their highest in over three years.

RARE UNREGULATED POWER MARKET

The Philippine government's plan to intervene in one of the few Asian markets where power prices are not regulated could begin as early as next week, Garin said.

Power tariffs in the archipelago of more than 100 million are already the second highest in the region, behind Singapore.

"With the exaggerated increase in fuel transportation costs, there's a multiplier effect," Garin said.

Some market rules might have to be suspended to afford temporary relief, Garin said, adding that distribution utilities had offered to boost coal-fired power in place of LNG.

"We'll intervene in the market, or whatever is allowed by law, especially for Meralco MER.PS, which is the biggest distribution utility we have," she said.

The government was in talks with First Gas Power FGEN.PS to supply any unused domestically extracted gas to power plants running purely on LNG, she added.

First Gas did not immediately respond to a request for comment.

In an email, Meralco told Reuters it supported the energy department's initiatives to rein in prices, had sufficient contracted coal, and was coordinating with power suppliers to hold down generation charges.

-Reporting by Sudarshan Varadhan in Singapore and Karen Lema in Manila; Editing by Clarence Fernandez/Reuters